CTL Strategies ranked by Asia Law Profiles as a leading tax law firm in the Maldives
The Asia Law Profiles have ranked CTL Strategies as the leading law firm in the areas of taxation in the Maldives. It has also recognized us as the highly recommended firm in the areas of litigation and disputes.
The team at CTL Strategies has been praised by their clients as “dedicated and professional” in representing them in foreign investment and, cross-border taxation matters. The firm has a notably stellar reputation amongst local and multinational businesses in the Maldives, for managing and handling tax controversies and corporate litigation.
Management Services Subject to WHT Only if Rendered After Commencement of the BPT Act: High Court
The High Court of Maldives, on 26 April 2019, struck down the Tax Appeal Tribunals decision regarding the interpretation of Section 6 of the Business Profit Tax Act, stating that Withholding Tax may be applied only on payments for services that are rendered after the commencement of the Act.
The decision was made in the case of Jetan Travel Services Pvt Ltd v MIRA, where the judges’ unanimous decision was made in favour of Jetan, overturning the decision made in case number TAT-CA-W/2014/006 of the Tribunal.
The issue in contention before the High Court was on retrospective application of the BPT Act, to impose Withholding Tax on payments made after the commencement of the Act but for services rendered prior to the commencement. The MIRA, in their arguments, relied upon then Section 64 of the BPT Regulation and the rules of statutory interpretation in asserting that the intention of Section 6 of the BPT Act was to impose WHT on a payment made for any of the types of services described in Section 6, regardless of when the service was rendered, so long as the payment was made during a tax year. However, counsel for Jetan argued that MIRA’s interpretation leads to a retrospective application of the law, which is a violation of the Constitution and the BPT Act.
The High Court, in it’s ratio decidendi, relied upon the rules of statutory interpretation and the Constitution of the Maldives, and the minutes of the discussion regarding the Business Profit Tax Bill on the Maldives Parliament floor. The High Court Judges, with reference to the Majilis minutes regarding the BPT Bill, stated that the minutes made it clear that Parliament did not intend the language to permit retrospective application of the law. Furthermore, the High Court bench also noted that interpreting Section 6 of the BPT Act in light of Section 64 of the BPT Regulation, allowed for a broader interpretation than permissible by law.
Tribunal Declares MIRAs Decision Invalid, Orders Re-audit
On 15 May 2019, the Tax Appeal Tribunal decided, by way of majority decision, in favor of the Appellant, Maldives Passions Private Limited and ordered the MIRA to re-audit the taxable periods under dispute in the appeal case.
The Tribunal, with a majority of two to one, deciding on two issues determined, firstly that, output tax must be declared at the rate GST was charged, and the MIRA has the power to order the payment of that tax pursuant to Section 13(d) of the GST Regulation, and secondly, that there are major discrepancies in the MIRAs tax computation for the audited taxable periods. The tribunal hence annulled the decision of the MIRA ordering a re-audit of the taxable periods under dispute.
The Tribunal in its decision, ordered the MIRA to refund the assessed amount to Maldives Passions in accordance with the law, and conduct a re-audit for the disputed taxable periods.
Maldives Passions was represented by Lawyers and Tax Advisors of CTL Strategies.
(Photo credits: Tax Appeal Tribunal Website)